Do Hikma Pharmaceuticals' (LON:HIK) Earnings Warrant Your Attention?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Hikma Pharmaceuticals (LON:HIK). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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Hikma Pharmaceuticals' Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's easy to see why many investors focus in on EPS growth. To the delight of shareholders, Hikma Pharmaceuticals' EPS soared from US$1.29 to US$1.68, over the last year. That's a commendable gain of 30%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. On the one hand, Hikma Pharmaceuticals' EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

See our latest analysis for Hikma Pharmaceuticals

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Hikma Pharmaceuticals?

Are Hikma Pharmaceuticals Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

While there was some insider selling, that pales in comparison to the US$3.5m that the Executive Vice Chairman & President of MENA, Mazen Samih Darwazah spent acquiring shares. We should note the average purchase price was around US$17.56. Big purchases like that are well worth noting, especially for those who like to follow the insider money.

On top of the insider buying, it's good to see that Hikma Pharmaceuticals insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$82m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Riad Mishlawi is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalisations between US$4.0b and US$12b, like Hikma Pharmaceuticals, the median CEO pay is around US$4.3m.

The Hikma Pharmaceuticals CEO received US$3.5m in compensation for the year ending December 2024. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Hikma Pharmaceuticals Worth Keeping An Eye On?

You can't deny that Hikma Pharmaceuticals has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. So it's fair to say that this stock may well deserve a spot on your watchlist. We should say that we've discovered 1 warning sign for Hikma Pharmaceuticals that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Hikma Pharmaceuticals, you'll probably love this curated collection of companies in GB that have an attractive valuation alongside insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.